Stocks are lower and Mortgage Bonds are trading near unchanged levels to start the day. Bonds were higher in the early going, but a stronger than expected S&P Global report erased those gains.
The S&P Global Composite, measuring manufacturing and services across the world, rose slightly to 54.6 and was stronger than estimates. Manufacturing improved from 51.3 to 51.7, while services rose from 54.8 to 55.1 – all of the components are in expansion above 50 and were better than anticipated. After the better than anticipated report, Bonds gave back most of their early gains.
Leading Economic Index
The Conference Board released their Leading Economic Index, which decreased in May by 0.5%, which was worse than estimates of -0.3% and follows -0.6% in April. The index has been negative 25 out of the last 26 months.
The Conference Board said while the index’s six-month growth rate remained firmly negative, the they do not currently forecast a recession. They do see things slowing, however, and project real GDP growth to fall under 1% over Q2 and Q3 of this year, as elevated inflation and high interest rates continue to weigh on consumer spending. If we do see the economy continue to slow and we see recession like conditions, it would likely be helpful for inflation and Mortgage Rates.
Existing Home Sales
Existing Home Sales, which measures closings on existing homes, fell 0.7% in May to an annualized pace of 4.11M units, which was slightly better than expected. Sales are now down 2.8% year over year.
This report likely measured people shopping for homes in March and April, when rates were more elevated. Considering this, Sales hung in there and fell less than expected.
Inventory increased 6.7% month-over-month to 1.28M units, which is a good thing because there is very limited supply, and this could lead to more sales. Inventory is now up 18.5% from the same time last year. There is a 3.7-month supply of homes, which is up from 3.5 months, but still very tight because 4.6 months is considered normal.
The median home price was $419,300, up 3% from last month and 5.8% from last year. For homes priced $1 million or more, inventory increased 34% from last year while sales increased 40% - This is largely due to a comeback in CA and is a big reason why the median home price rose so much.
Homes remained on the market for 24 days on average, down from 26 days in April and 33 days in March. Even with more inventory, the speed at which homes moved increased, which shows strength. We also saw 30% of homes sold above the list price, increasing from 27% in the previous report. Almost one in three homes are selling above list price - Make sure to use the bid over ask tool to solve this problem for your Realtors and help consumers emotionally get comfortable with it.
First-time homebuyers accounted for 31% of sales, which is down from 33% in the previous report, but up from 28% this time last year. Cash buyers accounted for 28% of sales, unchanged from April. Investors made up 16%, also unchanged.
News Next Week
Tuesday: Case Shiller HPI, FHFA HPI (Appreciation Reports)
Wednesday: Mortgage Apps, New Home Sales
Thursday: Initial Jobless Claims, Fina Q1 GDP, Pending Home Sales
Friday: Personal Consumption Expenditures (PCE)
Technical Analysis
The charts are most unchanged as they have been the past week - Mortgage Bonds and the 10-year continue to trade sideways in wide ranges between support and resistance.
Mortgage-Backed Securities are between a tough overhead ceiling of resistance at 100.872 and a triple floor of support at the 100.427 Fibonacci level and 100 and 25-day Moving Averages.
The 10-year is also in a very wide range between support at 4.18% and overhead resistance at the 100 and 200-day Moving Averages.
We must remain on guard as MBS and Yields are susceptible to big price swings within these wide ranges. We will likely remain rangebound until some of the important economic data next week, highlighted by the Fed’s favorite measure of inflation, PCE (Personal Consumption Expenditures), which we think could come in lighter than estimates – More on that next week.
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